India's GDP Growth Projected at 6.3% to 6.5% for 2024-25, NSE Facilitates 268 IPOs Raising $19.5 Billion

India, one of the world’s fastest-growing major economies, is projected to achieve a GDP growth rate of 6.3% to 6.5% for the fiscal year 2024–25. The National Stock Exchange (NSE) has solidified its position as a global leader by facilitating 268 initial public offerings (IPOs) in 2024, raising approximately $19.5 billion and surpassing other major markets. Despite these achievements, Indian startups and financial institutions face significant challenges in accessing international capital, including limited access to funding, regulatory complexities, and bureaucratic hurdles, which could impede growth and scalability.

Tokenization, the process of converting ownership rights of real-world assets into digital tokens on a blockchain, presents a promising solution. By embracing tokenization, India could address existing capital access challenges, foster greater financial inclusion, and position itself at the forefront of digital financial innovation. Tokenization involves creating digital representations of assets on a blockchain, such as dividing a high-value property into multiple digital tokens, each representing a fractional ownership stake. Investors can buy, sell, or trade these tokens, facilitating greater liquidity and accessibility.

Tokenization in India offers numerous benefits, including enhanced access to global capital, liquidity and market efficiency, fractional ownership, cost reduction through automation, and transparency and security. By digitizing assets such as equity, debt, or intellectual property into blockchain-based tokens, startups and SMEs can lower entry barriers for international investors, facilitating cross-border fundraising and expanding access to global capital markets. This process enables quicker transactions and more dynamic pricing, enhancing overall market efficiency. Investors benefit from the ability to enter and exit positions with greater ease, while asset owners can unlock value from previously illiquid holdings.

Tokenization democratizes investment by allowing high-value assets to be divided into smaller, affordable units, making investment opportunities accessible to a broader population. Individuals can invest in fractions of real estate properties or fine art pieces, which were previously out of reach for many. This democratization fosters financial inclusion and enables more people to participate in wealth-building activities. Utilizing blockchain technology and smart contracts, tokenization automates various processes such as compliance checks, settlements, and record-keeping, reducing the need for intermediaries, lowering transaction costs, and minimizing administrative burdens. Financial institutions and investors alike benefit from streamlined operations and enhanced efficiency. Blockchain’s immutable ledger ensures that all transactions are transparent and tamper-proof, building trust among investors and regulators by providing a clear audit trail and reducing the risk of fraud. The decentralized nature of blockchain enhances security, safeguarding assets against unauthorized access and cyber threats.

However, tokenization in India faces several challenges and risks, including regulatory uncertainty, technological barriers, market adoption challenges, cybersecurity concerns, and the volatility of crypto assets. India currently lacks a comprehensive regulatory framework for tokenized assets, creating ambiguity around the legal status of digital tokens and complicating issues such as ownership rights, taxation, and compliance. The adoption of tokenization is hindered by technological challenges, including inadequate blockchain infrastructure and a shortage of skilled professionals. Many Indian businesses, especially SMEs, face difficulties in integrating blockchain technology due to limited technical expertise and high implementation costs. Traditional financial institutions and investors in India exhibit reluctance toward embracing tokenization due to a lack of awareness, skepticism about the technology’s benefits, and concerns over regulatory uncertainties. The decentralized nature of blockchain technology introduces cybersecurity risks, including vulnerabilities to hacking, fraud, and unauthorized access. Ensuring the security of digital wallets and private keys is critical, as breaches can lead to significant financial losses. The inherent volatility of crypto assets poses a risk to the stability of tokenized markets, as price fluctuations can lead to substantial financial losses for investors and may deter participation in tokenized asset markets.

Tokenization has the power to transform traditional asset classes and financial instruments across various sectors of the economy. In the startup and venture capital sector, tokenization of equity could enable startups to raise capital from a broader base of global and domestic investors through compliant security token offerings (STOs). Venture capital funds could also tokenize fund units, improving liquidity for limited partners (LPs) and offering smaller investors access to VC-style investments. This democratization could deepen funding pools and reduce over-reliance on traditional VCs or angel networks. In the real estate sector, tokenized real estate allows properties to be divided into digital shares, enabling fractional ownership and easier transfer. This makes it possible for average investors to participate in premium commercial or residential real estate projects. Smart contracts can automate rental income distribution, property management, and asset transfers, enhancing transparency and reducing costs. In the commodities and agriculture sector, tokenizing commodities (e.g., gold-backed tokens or digital warehouse receipts for agricultural produce) can help Indian exporters tap into international trade platforms and DeFi liquidity. It can also help create transparent supply chains, reduce fraud, and offer better price discovery for farmers and small traders. Tokenized commodity markets can promote greater participation from retail and institutional investors alike. In the government bonds and public debt sector, tokenizing public debt instruments could allow the government to issue retail-accessible digital bonds via blockchain, increasing participation and reducing issuance costs. It can also boost secondary market liquidity, as tokens can be traded more easily than traditional bonds. Blockchain-enabled transparency may improve investor trust and allow for better tracking of government spending. The Reserve Bank of India (RBI) has already introduced a retail direct bond platform, and tokenization could further simplify access and lower entry barriers.

For tokenization to unlock its full potential in India, several foundational elements must come together, spanning regulation, infrastructure, institutional trust, and public awareness. The absence of a specific legal framework for tokenized assets in India remains one of the biggest obstacles. The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) must develop clear rules that define what constitutes a tokenized security or asset, who can issue, trade, or hold them, and how existing securities laws apply to tokenization. This includes updates to the Companies Act, Securities Contracts Regulation Act, and other financial legislation. A regulatory sandbox for tokenized products, as seen in the UK and Singapore, could help test innovations safely. Mainstream adoption will only occur if India’s traditional financial system embraces tokenization. Banks, NBFCs, mutual funds, and exchanges need to integrate tokenized assets into their systems. Institutional investors (e.g., pension funds, insurance firms) must be allowed to invest in compliant tokenized products. The government can play a proactive role by piloting tokenization in public infrastructure, government bonds, or land records. India needs a secure, scalable blockchain infrastructure to support tokenized assets and smart contracts. This includes regulatory-compliant public and permissioned blockchains, identity verification layers (e.g., Aadhaar integration), and secure custody solutions. On-chain settlement systems and interoperability with existing payment rails (like UPI or NPCI) will be critical. India can leverage local talent in blockchain development, cybersecurity, and fintech to build homegrown solutions. Tokenization introduces a new model of asset ownership, so public and institutional education is crucial. Retail investors must understand how tokenized assets work, including risks like smart contract bugs or market volatility. Financial professionals and advisors need training to offer guidance on tokenized instruments. Regulatory bodies and educational platforms should collaborate to roll out digital literacy campaigns, demo platforms, and risk disclosures. Without informed users, tokenization may be misused or fail to build lasting trust.

Tokenization holds immense promise for India’s financial future, offering a pathway to more inclusive, liquid, and globally competitive capital markets. By digitizing real-world assets, India can unlock new funding channels for startups, simplify real estate investments, and increase accessibility to commodities and government bonds. These changes could shift India from a capital-hungry market to a global fintech leader. However, for tokenization to deliver on its potential, India must build the right foundations, clear regulations, institutional support, robust technology, and investor education. If these challenges are addressed collaboratively, tokenization could become the breakthrough India needs to compete and thrive in the next era of global finance.